The Italian deputy prime minister, Matteo Salvini, has threatened to sue Jean-Claude Juncker for damages, accusing the EU president of pushing up Romeâs cost of borrowing by likening Italy to Greece.

Salvini, who is also Italyâs interior minister and leader of the far-right League party, was speaking after Junckerâs comments helped send the yield on Italian benchmark bonds to a four-and-a-half year high of 3.4%, while shares in Italian banks plunged.

He said: âThe European commission president Juncker, by equating Italy with Greece, sends the spread [gap] crazy. He could have spared us that.â

European markets fall after Italy's deficit-widening budget plans Read more

Salvini added: âHe should drink two glasses of water before opening his mouth, and stop spreading non-existent threats. Or weâll ask him for damages.â

Juncker said earlier this week that the Italian governing coalitionâs pledge to press ahead with a budget deficit that will breach European Union rules threatens the euroâs existence.

Salvini said Brussels was exaggerating the impact of Rome pushing ahead with its planned 2.4% budget shortfall for at least the next three years.

He said the rising cost of financing Italyâs deb ts was the fault of EU officials who had spooked investors and increased the gap, also known as spread, between Italian and German borrowing costs.

Salvini added: âThe words and threats of Juncker and other European bureaucrats continue to make the spread rise, with the aim of attacking the government and the Italian economy. We are ready to ask damages from those who wish Italy ill.â

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Juncker said the European commission would need to be firm with Italyâs budget bill âor else the euro endsâ.

Deputy prime minister, Luigi Di Maio, Salviniâs coalition partner and the leader of the Five-Star Movement, backed his allyâs uncompromising line to set a budget that could push Italyâs debt to a GDP ratio higher than last yearâs 131.2%.

The move prompted the sale of Italian government bonds and an increase in the interest rate charged by Italyâs lenders as investors, fearing that the country was heading closer to defaulting on its debts, took flight.

The sale of Italian bonds accelerated after the Eurosceptic League MP, Claudio Borghi, said the countryâs economic situation would be easier if it were outside the eurozone. However, Borghi, who is not a minister, did not suggest the government planned to leave the euro.

The coalition has argued that it is adopting a longer-term strategy to dig Italy out of the economic doldrums. It insists the controversial spending plans will accelerate economic output and turn around decades of stagnant growth, high youth unemployment and declining tax receipts.

Over the next year, the finance ministry expects the budget deficit to hit 2.4%, slightly higher than last yearâs 2.3%. However, it is hoped that the mix of spending, muc h of it on health and a universal basic income alongside a boost for infrastructure projects, will increase lacklustre consumer spending to push GDP growth beyond last yearâs 1.6%.

Di Maio said: âWe are not turning back from that 2.4% target, that has to be clear ... We will not backtrack by a millimetre.â

The decision follows a row inside the cabinet after the technocratic finance minister, Giovanni Tria, recommended a budget with a 1.6% deficit to stay within EU rules and prevent the overall debt-to-GDP ratio worsening.

While a headline deficit of 2.4% would be within the 3% European Union limit, its emphasis on reducing the effects of austerity means its structural â" or underlying â" deficit would rise along with the headline figure, which runs contrary to EU rules.

Juncker said at the weekend that he was concerned about plans to push up Italyâs public debt pile, proportionally the second highest in the EU after Greeceâs.

He said: â Italy is distancing itself from the budgetary targets we have jointly agreed at EU level. I would not wish that, after having really been able to cope with the Greek crisis, weâll end up in the same crisis in Italy.â

Salvini said in response: âNo one in Italy is taken in by Junckerâs threats.â He added that the governmentâs priority was to respond to the basic needs of its citizens and that the criticism of its budget âwill not stop usâ.